Financial Inclusion: Current position
The Rangarajan Committee had placed its report in mid 2008. In order to further financial inclusion, the Government, NABARD and the Reserve Bank are pursuing several initiatives.
- Two funds namely Financial Inclusion Fund (FIF) (to meet the costs of developmental and promotional interventions towards financial inclusion) and Financial Inclusion Technology Fund (FITF)(to meet the costs of technology adoption) each having initial corpus of ` 500 crore have been constituted by the GOI and placed with NABARD .
- Each fund is to be equally contributed by GOI, RBI and NABARD with annual accretions. Eligible organizations to avail the funds for greater financial inclusion.
- In the Union Budget 2010-11, the Finance Minister announced that every village in the country with a population of over 2000 must have access to banking services by March 2012. Even as the brick and mortar branch presence will expand, the big driver going forward will be branchless banking based on the business correspondent (BC) model and leveraging on technology. In order to facilitate this, the RBI has also enlarged the types of entities that can be engaged as BCs.
- Unique Identification Number (UID) Project of Government of India would be a powerful instrument for helping the poor establishes their identity to meet the banks’ KYC norms. This will reduce cash and non-cash transaction costs, both to the banks and to the potential customers.
- Every domestic commercial bank (public and private sector) has been asked by the Reserve Bank of India to prepare its own Financial Inclusion Plan (FIP) and have it approved by its Board. RBI has taken this step with a view that each bank should have ownership of its FIP and each bank should build on its comparative advantage. So banks have been given freedom as far as modus operandi is concerned, and they are supposed to be innovative and entrepreneurial and try out models and experiments consistent with their business models.
- The Financial Inclusion Plans (FIPs)are basically meant to be rolled out over the next three years and are required to include indicators for performance evaluation. The RBI has regularly held meetings with the chairmen of banks to review the FIPs prepared by them. The recent meeting was held in June 2010, which was chaired by Deputy Governor, Dr Chakrabarty. These meetings have enabled a clearer understanding of issues in financial inclusion.
- For the individual FIP to succeed there is an effort to put in place scalable technology solutions. The Regional Rural Banks would also be Core Banking System (CBS) enabled.
- The Business Correspondent model has to be deployed exhaustively coupled with biometric technology.